Singular Infrastructure

Thailand's national infrastructure, particularly its transport
network, is set to undergo a long-awaited transformation over the
next eight years, following the approval of a US$75 billion (Bt2.4
trillion) master plan by the country's ruling military regime. The
National Council for Peace and Order (NCPO) agreed in principle
to implement a set of projects known as the "Strategies on
Thailand's Infrastructure Development in Transportation (2014
- 2022)", as proposed by the Ministry of Transport. Concerned
public agencies are to lay out their long-term plans based on
the Strategies. The NCPO also approved the need to initiate
immediately certain critical phases of the Strategies in 2014
and 2015. For instance, transportation connectivity between
commercial/primary cities and Bangkok (plus environs), and
upgrading railway transportation through the construction of
dual-gauge rail infrastructure for logistics purposes and for
capacity enhancement of local trains.

The primary goal of the government is to restructure the
Thai transportation system by accelerating the expansion
and improvement of the national railway network to correct
the country's lopsided dependence on road transportation.
Thus, 78% of the Bt2.4 trillion budgeted for investment in the
transportation infrastructure of Thailand over the next seven
years would be devoted to railway development. Among other
aims, the government seeks to cut Thailand's logistics costs
from 15.2% to 13.2% of GDP, create 1.6 million jobs; and raise
annual GDP growth by 1%. The real benefit to be derived is
the enhanced competitiveness of the country after Thailand's
transportation and logistics have been restructured.

Another major component is to expand Bangkok's mass transit
system by 400km from the current 80km by 2017. Construction of new roads is part of the plan to link Thailand to a road network
covering the six countries (southern China, Thailand, Myanmar,
Laos, Cambodia and Vietnam) of the Greater Mekong Sub-region.

Thailand's transportation infrastructure is road-oriented. There
are 462,133km of roads in the country but less than 4,000km
of railroad track. Water transportation also is under-utilized as
waterways comprise only 5,000km. Thailand ranks 48th overall
for infrastructure under basic requirements rankings (WEF
Global Competitive Report 2014-2015). Comparing the different
modes of transport, by road is the most expensive, estimated
at Bt2.12 per ton per km (t/km), followed by rail at Bt0.95/t/
km and water 0.65/t/km. The issue is that 87.5% of Thailand's
freight is transported by road and only 1.4% by rail. As a result,
transportation consumes as much as 31% of Thailand's energy
use (industrial production by comparison accounts for 41%).
Typically, transportation accounts for about 15% of total energy
use in advanced countries.

It was reported by the Bangkok Post that the NCPO has approved
two high-speed train projects (with a maximum velocity of 160
kilometers per hour) at a total cost of Bt741.4 billion. Indeed, the
two routes approved are intended to serve as a transport link
between Thailand and southern China. The Nong Khai-Map Ta
Phut route will be 737km in length and cost Bt392.5 billion while
the Chiang Khong-Ban Phachi route will be 655km long and
cost Bt348.8 billion. The construction of these two high-speed
train routes is part of the eight-year infrastructure development
scheme beginning this year.

Ms. Soithip Traisuth, permanent secretary for transport, declared
that these projects are intended to improve connections within
the country's transport network, which includes gateways to
border trade, key cities, Bangkok, its surrounding provinces,
seaports, airports, and cargo rail transport centers. Recently, the
Ministry of Transport has been allocated a budget of Bt112.38
billion for fiscal 2015, up 11.7 per cent from the previous fiscal
year, making it the second-largest recipient of State funds.

Furthermore, the Highways Department will be allocated about
Bt61 billion for fiscal 2015, up from Bt52 billion from the previous
fiscal year, in a bid to improve the transport logistics system.
Apart from the Bt9 billion investment on upgrading Thailand's
main highways network, projects linking the various regions
of the country (Bt2.5 billion) and projects dealing with ASEAN
connectivity (Bt1.2 billion) were included. Moreover, the Bt40
billion budget of Rural Roads Department would focus on
carrying out expansion of the road network into underdeveloped
areas of Thailand. Of that, Bt544 million was set aside for rural
road development for tourism purposes.

The position of the government is that the high-speed trains will
be much more than a public service, arguing that the sharp fall
in commuting time to and from nearby provinces will decentralize
Bangkok further, bringing with it better quality of life and greater
economic opportunities for Thais. The high-speed train also will
carry high-value and time-sensitive (perishable) cargo. Currently,
30% of agricultural products carried by trucks need to be written
off as a loss as they reach the market either damaged or spoilt.
Apart from constructing the rail routes, the urgent infrastructure
development plan also includes plans to buy 106 new locomotives
to serve existing lines.

At present Bangkok is served by a mass transit system comprised
of four lines with a distance totaling 80km. The 10 mass transit
lines, construction of which is expected to completed by 2019,
would add another 410km. Of these, four lines (100km) are
under construction and should be completed by 2017.

More specifically, the 23km Purple Line (Bang Yai-Bang Sue)
should be completed by next year. On the other hand, the 27km Blue Line extension (Bang
Sue-Tha Phra-Bang Khae), the
12.8km Green Line (Bearing-Samut Prakan), and the 26km
Red Line (Bang Sue-Rangsit)
are all expected to be completed
by 2017. The other electric rail
route projects are still pending
either the bidding process or the
pre-bidding preparation process,
which includes an environmental
impact assessment as mandated
by law.

Thailand's road system is
already well-developed and
the annual budget to build
and maintain roads is already
sufficient. Therefore, investment
in roads as part of the Bt2.4
trillion infrastructure plan is
more modest. In particular, it is
meant to complement the Asia
Development Bank's Greater
Mekong Subregion project (started in 1990) aimed at linking by
road countries such as China, Myanmar, Thailand, Cambodia,
Laos and Vietnam.

On the Thai side, the proposed road projects include: the
Southern Economic Corridor, which links Bangkok to major
cities in Cambodia and Ho Chi Minh City in Vietnam; the East-West Economic Corridor, which links Myanmar, north/northeast
Thailand, Laos and the port of Da Nang in Vietnam; and the
North-South Economic Corridor, which links northern Thailand
through Laos and Myanmar to Kunming in southern China. All
in all, there are 27 projects involving the three countries, which
share their border with Thailand. There are 11 projects involving
Laos, 3 projects involving Cambodia, 5 projects involving
Malaysia, and 8 projects involving Myanmar.

For Thailand, the second-largest economy in Southeast Asia
after Indonesia, there is a need for infrastructure improvements,
particularly because trade and commerce with neighboring
ASEAN members Cambodia, Laos, Myanmar and Vietnam
(CLMV) is becoming increasingly more important to the Thai
economy.

It must be mentioned that trade with the CLMV countries
comprised up to 8.3% of Thailand's exports in 2013, up from 5.7%
just five years ago (2008). That means that when considered as
export markets the CLMV bloc is nearly as important as the
comparatively enormous European Union, which consumes
about 10% of Thailand's exports.

Thailand's border trade with Myanmar, Laos, Cambodia and
Malaysia amounted to about US$25bn in 2013 or 10% of total
exports. Trade with Malaysia accounts for nearly 53% of total
border trade. However, the trade with Myanmar, Laos and
Cambodia has grown quickly in recent years and it is likely that
there is significant under-counting of actual trade given the long
and unmarked border between Thailand and its neighboring
countries. Moreover, other economic activities such as tourism
and investment are likely to rise as connectivity is enhanced.

Overall, the rationale of the government's transportation investment program is to engineer a modal shift from road to rail.
Furthermore, the new infrastructure projects are likely to tap the
fiscal budget, borrowing and public-private partnerships (PPPs).
Dr. Chula Sukmanop, director-general of the Office of Transport
and Traffic Policy and Planning, commented to the Bangkok Post
that the construction of four-lane roads, ports, motorways and the
Skytrain extension should be paid for by the fiscal budget, while
mass-transit routes and some dual track railways could rely on
domestic and foreign loans.

Apart from the railway infrastructure, State funds will be tapped
for airport and seaport improvements. For instance, Thailand's
newest scheme to boost air transport capacity calls for raising
efficiency standards at Suvarnabhumi International Airport,
promoting more the country's regional airports, advancing
domestic aviation industries, and improving the use of Thai
air space. The government also intends to improve water
infrastructure to prevent devastating floods like the ones that
inundated Bangkok and surrounding areas in 2011. According
to Arkhom Termpittayapaisith, deputy minister of transport
and secretary-general of the National Economic and Social
Development Board, some elements of the Bt350 billion water
management plan are worth keeping, especially irrigation
expansion in Phitsanulok and Phichit, which would help increase
arable areas.

Additionally, development of telecommunications infrastructure
is geared to provide high-speed internet service covering all
areas of the country and creating more opportunity for Thais to
be connected. Moreover, the Government Information Network
(GInet) will be developed further to support large companies
and SMEs in utilizing it efficiently, thereby improving their
competitiveness and generating greater income. In fact, the
Ministry of Information and Communications Technology was allocated a budget of Bt5.723 billion for fiscal 2015. Its main roles
are to manage and develop ICT infrastructure and promote ICT
use in many areas.

Likewise, improvement of public infrastructure is another target.
The water supply system in rural areas and economic zones as
well as waste water management systems will be enhanced to
stimulate proficient utilization of resources and their measured
consumption by the public as well as the manufacturing and
service sectors.

Setting dual track rail lines, building four-lane highways to nine
key border points, and even adding more truck terminals would
do more to boost trade with neighboring countries and improve
transportation logistics. Planned construction is likely to boost
Thailand's GDP and - as a knock-on effect - lead to significant
private investment. Industrial and real estate firms will step up
their own investments in private projects as a result of the Thai
government's plans. Similarly, it is expected there would be more
business opportunities in the service sector, such as hotels and
logistics.

Capitalizing on Thailand's geographical location and extensive
infrastructure, the potential of ASEAN connectivity gains could
be tremendous. Road linkages with Myanmar and Cambodia are
currently inadequate and rail connections insufficient, but exports
to Myanmar, Laos, Cambodia and Vietnam are increasing
every year. Ocean vessels carry significant proportions of Thai
products to Myanmar and Vietnam, while poor connections
make exports to Cambodia a cumbersome venture. With ample
road and rail links, exports to neighboring countries could see a
significant uplift, thereby resulting in economic growth and the
transformation of Thailand into a genuine ASEAN hub.